The Global ESG Stewardship Ecosystem

Abstract

There is growing interest in the phenomenon of international or transnational corporate law. This development is marked by its complexity. It involves multidirectional processes of law development and transmission resulting from the initiatives of numerous state, international and private actors.

Transnational developments are driving another remarkable feature of contemporary corporate governance practice – namely, the dramatic rise of stewardship concerning ESG issues, including climate change.

These developments are underpinned by what our paper calls the “global ESG stewardship ecosystem”. This ecosystem involves a transnational network of different non-state actors, including globally-active institutional investors, international institutions and agencies, non-governmental organizations, investor networks and representative bodies, as well as the various service providers that support the governance activities of institutional investors.

Although the “global ESG stewardship ecosystem” comprises a myriad of actors, institutional investors are at its core. They are critical to norm development and goal-setting, network creation and coordination and transmission of ESG stewardship. This ecosystem exerts significant influence, shaping ESG investor stewardship, not only “on the books”, but also “on the ground” in markets around the world, including developing markets.

Our paper provides two important contributions to contemporary corporate governance discussion. First, it highlights the scale, complexity and influence of the “global ESG stewardship ecosystem”. Second, it explores the implications of the ecosystem for a range of contemporary corporate governance theories and debates. Our analysis of the “global ESG stewardship ecosystem” challenges many assumptions of modern corporate governance, such as the supposed “rational reticence” of institutional investors, the nature of “agency capitalism”, the implications of common ownership, the role and potential of stewardship codes. Finally, the “global ESG stewardship ecosystem” revives the convergence-divergence debate in corporate governance and suggests that any convergence which is underway is likely to be complex and unpredictable.

Keywords: stewardship, institutional investors, ESG, activism, environmental, social, corporate governance, CSR, corporate social responsibility, transnational corporate law, international corporate law

JEL Classification: D23, D70, G23, G30, G32, K22, K33, L21, L 22, N20, 016